Steel Partners Withdraws Proposal to Acquire 33.3% of Sapporo Citing Company's Ever-Worsening Performance and Refusal to Negotiate

Business Wire, Feb 17, 2009

Capital Preservation

We caution against trying to improve the Company's value by making further acquisitions. Using past performance as a barometer, it is clear that management cannot properly manage its current businesses. The substantial impairment charge on the Sleeman acquisition demonstrates this inability. We believe the Company's management has failed to realize any synergies from the 2006 acquisition of Sleeman and no synergies can possibly be derived from Sapporo's substantial investment in Universe Foods Ltd. as it has nothing to do with the beer or real estate businesses. We believe the same about the proposed acquisition of 49% of Azumino Shokuhin Koubou K.K., a subsidiary of Marudai Food Company, Ltd.

We note that management and the Board have failed to deliver an annual 8% return on equity ("ROE") for the Company, the minimum required by the Japan Pension Fund Association in order to receive its support for the re-election of incumbent directors. Further, based on guidance provided by the Company on February 13, 2009, ROE is not projected to meet this level through 2010. By failing to meet this threshold, management has disappointed all stakeholders, including customers, suppliers, employees, pensioners and shareholders. We also note that Sapporo had negative returns on invested capital and is therefore destroying corporate and shareholder value.

Conclusion

As a result of management's poor performance, Steel Partners intends to vote against both the re-election of the Board and an extension of the AWS at the upcoming annual general meeting. We will continue to monitor the Company's performance and reserve our rights as a shareholder to take any and all actions if corporate performance and shareholder value do not improve.

Should you wish to discuss any of these items addressed in this letter, please contact me at your earliest convenience.

Sincerely,

Warren G. Lichtenstein

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Thomas J. Niedermeyer, Jr.





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Joshua Schechter

About SPJSF

Steel Partners Japan Strategic Fund (Offshore), L.P. is a long-term relationship/active value investor that seeks to work with the management of its portfolio companies to increase corporate value for all stakeholders and shareholders.